l

MOI UNIVERSITY
SCHOOL OF TOURISM, HOSPITALITY AND
EVENTS MANAGEMENT
NAME : ELIZABETH NJOGA
MTH 809 : MARKETING MANAGEMENT
MSC. EXECUTIVE
ASSIGNMENT: MARKETING MIX
LECTURER : MRS. FLORENCE MB!AGA
DATE : MARCH "0#$
2
TABLE OF CONTENTS
Page
TABLE OF CONTENTS Page...................................................................................... 2
THE ELEMENTS OF MARKETlNG MlX.............................................................................4
l.0lNTRODUClTON............................................................................................................ 4
DEFlNlTlON.................................................................................................................... 5
l.lTHE PRODUCT CONCEPT....................................................................................... 6
l.2CLASSlFlCATlON OF PRODUCTS...........................................................................7
l.3CONVENlENCE GOODS........................................................................................... 7
l.4SHOPPlNG GOODS.................................................................................................. 7
l.5SPEClALlTY PRODUCTS.......................................................................................... 7
l.6DURABlLlTY.............................................................................................................. 8
l.7PERlSHABlLlTY OF PRODUCTS..............................................................................8
l.8EXTENT OF MASS PRODUCTlON...........................................................................8
2.0TOTAL PRODUCT CONCEPT...................................................................................... 8
2.lCORE PRODUCT...................................................................................................... 9
2.2EXPECTED PRODUCT.............................................................................................. 9
2.3AUGMENTED PRODUCT.......................................................................................... 9
3.0PRODUCT LlFE CYCLE CONCEPT..............................................................................9
3.llNTRODUCTlON STAGE.........................................................................................l0
3.2GROWTH STAGE.................................................................................................... ll
3.3MATURlTY STAGE.................................................................................................. ll
3.4DECLlNE STAGE..................................................................................................... ll
4.0lDENTlFYlNG A PRODUCT LlFE CYCLE STAGE......................................................ll
4.lCRlTlClSMS OF THE PLC CONCEPT.....................................................................l2
4.2MANAGlNG EXlSTlNG PRODUCTS.......................................................................l3
4.3BCG product / Business Management Matrix...........................................................l3
4.3.lSTARS............................................................................................................... l3
4.3.2CASH COWS..................................................................................................... l4
4.3.3DOGS................................................................................................................ l4
4.3.4QUESlTON MARKS / PROBLEM CHlLD...........................................................l4
5.0THE SELLlNG CONCEPT........................................................................................... l4
3
5.lMeaning and Value of Price......................................................................................l4
5.2ECONOMlC THEORY OF PRlClNG........................................................................l5
5.2.lPURE MONOPOLY...............................................................................................l5
5.2.2OLlGOPOLY.......................................................................................................... l5
5.2.3MONOPOLlSTlC COMPETlTlON.........................................................................l5
5.3KEY lSSUES THAT DETERMlNE MARKETlNG PRlClNG......................................l5
5.3.lPRODUCTlON COSTS.........................................................................................l5
5.3.2COMPETlTlON...................................................................................................... l6
5.3.3DEMAND............................................................................................................... l6
5.3.4lNTERMEDlARlES MARGlNS...............................................................................l6
5.3.5SUPPLlER ADJUSTMENT....................................................................................l6
5.3.6PRODUCT POSlTlONlNG.................................................................................... l6
5.3.7lNCOME LEVELS.................................................................................................. l6
5.4PRlCE SETTlNG STRATEGlES (High Relative Price).................................................l6
5.5MARKET PENETRATlON STRATEGY (Low Relative Price).......................................l6
5.6PSYCHOLOGlCAL PRlClNG....................................................................................... l7
5.7DlFFERNETlAL PRlClNG............................................................................................ l7
5.8GOlNG RATE PRlClNG...............................................................................................l7
5.9COST PLUS PRlVACY.............................................................................................l7
5.l0ON- COlN PURCHASlNG PRlClNG..........................................................................l7
5.llQUANTUM PRlClNG................................................................................................. l7
5.l2PREDATORY PRlClNG.............................................................................................l7
5.l3PROMOTlONAL PRlClNG......................................................................................... l8
6.0MARKETlNG PROMOTlON MlX..................................................................................l8
THE PROMOTlONAL TOOLS:-.....................................................................................l8
6.lADVERTlSlNG......................................................................................................... l9
6.2SALES PROMOTlON...............................................................................................l9
6.3PUBLlC RELATlONS AND PUBLlClTY....................................................................l9
6.4PERSONAL SELLlNG.............................................................................................. 20
7.0PLACE......................................................................................................................... 20
7.lPHYSlCAL DlSTRlBUTlON......................................................................................20
7.2DlSTlRBUTlON/CHANNEL MANAGEMENT............................................................2l
7.3SlGNlFlCANCE OF MAREKTlNG CHANNELS........................................................2l
7.4UTlLlTY.................................................................................................................... 22
7.5TYPES OF MARKETlNG CHANNELS.....................................................................24
7.6lNDUSTRlAL DlSTRlBUTOR...................................................................................25
7.7SELECTlNG MARKET CHANNELS.........................................................................25
4
8.0REFERENCES............................................................................................................. 27
THE ELEMENTS OF MARKETING MIX
1.0 INTRODUCITON
The term marketing mix was coined by Borden (1964), a Harvard university ro!essor who
drew on a "o##eague$s descrition o! a marketing executive as a %mixer o! ingredients&' He
viewed executives as eo#e who are constant#y engaged in creative !ashioning a mix o!
marketing rocedures and o#icies in their e!!ort to roduce a ro!itab#e enterrise& Borden
suggested that i! marketing executives were mixers o! ingredients, then what they roduced
wou#d be described as a marketing mix& The word was thus born&
(ccording to Borden (1964) the success o! marketing management deends on the
deve#oment o! a suitab#e b#end o! e#ements given, the !orces con!ronting !irms,
consumers$ buying behavior, intermediaries$ behavior, cometitors osition and behavior,
government contro# over marketing activities& He suggested a #ist o! 1) imortant e#ements
o! ingredients that make u a marketing rograms and which ca## !or management decision&
They are name#y, roduct #anning, ricing brandy, channe#* o! distribution, ersona#
se##ing, advertising, romotions, acking, dis#aying, servicing, hysica# hand#ing, !act
!inding and ana#ysis& +ith marketing being researched on, it was sca#ed down to the 1)
e#ements o! marketing mix then down to ,& Then Booms and Bitner( 19-1), on the other
hand o! the , added (.eo#e, rocess, and hysica# evidence) as the e#ement o! marketing
mix to encomass the extra e#ements resent in service industries, which a!ter a## reresent
the bu#k o! roduct in a modern society& This mode# has been wide#y adated because it is
easy to remember and understand, in that it brie!#y states on the seven mode#s which are/0
.roduct/ being a bund#e o! bene!its
.rice/ 1s the exchange that customer makes in order to obtain a roduct
.#ace/ the #ocation where the exchange takes #ace
.romotion 2 the marketing communication
.eo#e/ the individua#s invo#ved in roviding customer satis!action&
.rocess/ the set o! activities which together roduce customer satis!action
.hysica# evidence/ The tangib#e roo! that a service has taken #ace&
F%&'(: the mix has been critici3ed on the ground that it im#ies a set o! shar boundaries
between its e#ements which iminges on each other&
S)*+,-./: it has been critici3ed because it does not cover everything that marketers do0 it
has no interna# marketing and has nothing about cometition with customer&
T0%&-: The marketing concet im#ies that marketing is something which is done to
customers, rather than something which seeks cooeration and interaction between
customers and the organi3ation&
5
F+1&(0: The mix is a#most4 !ocused on customers, whereas in !act the bu#k o! marketing
activity is carried out between business to business& 5arketing is erhas #ess researched in
this section and attracts #ess attention because it oerates at a #ow ro!i#e&
6uccess does not come !rom maniu#ation o! the marketing mix comonents but !rom
estab#ishing #ong term re#ationshis between the !irms concerned& 1! these re#ationshis are
strong enough they act as a barrier to entry !or other su#ies (7ord, Hankinson and
8ohnson 19-6)& The mode# does not mean it is o! no use, a## mode#s are an abstract o!
rea#ity, so do not give the who#e icture& The mode# does he# in considering issue or
#anning ways o! managing the business, but it shou#d not be treated as it rovides a## the
answers&
9ver the years the , and 1) marketing mix e#ements have been condensed and categori3ed
under !our main e#ements, re!erred as 4.6 name#y/0
.roduct 0 consumer so#ution
.rice 2 convenience
.rice 2 customer cost
.romotion 2 communication
They are common#y re!erred to as 4s& The 4s are essentia# too# kit o! any marketing
strategy* conse:uent#y, ;racker (19,<) has de!ined them as getting the right roduct at the
right #ace at the right time, at right rice, with the right romotion to attract eo#e who
wi## buy it& =!!ective marketing decisions revo#ve t around the 4s&
(ccording to =nnew (199<), marketing mix as a concet has both strategic and tactic>
dimensions main#y invo#ved with recise detai#s !or each e#ement&
DEFINITION
5arketing mix can be de!ined as a set o! marketing too#s that a !irm uses to ursue its
marketing ob?ectives in the target market& 1t can a#so be de!ined as the activities, set o!
institutions, and rocesses !or creating, communicating, de#ivering, and exchanging
o!!erings that have va#ue !or customers, c#ients, artners, and society at #arge&
5c"arthy c#assi!ied these too#s into !our broad grous that he ca##ed the !our s o!
marketing as shown in 7igure 1&1
M2&3)(%,4 M%5
P&+-1*(
PRODUCT
.roduct
variety
@ua#ity
;esign
!eatures
Brand
names
.ackaging
6i3es
6ervices
+arranties
Aeturns
P&%*)
PRICE
.rice setting
strategies
enetration strategy
.sycho#ogica#
ricing
;i!!erentia# ricing
Boing rate ricing
"ost 2 #us rivacy
9n0 coin urchasing
pricing
Quantum pricing
Predatory pricing
Promotional
pricing

P&++(%+,
PROMOTION
(dversity
6a#es !orce
.ub#ic
re#ations
;irect
marketing
P.2*)
PLACE
"overage
(ssortmen
ts
Cocations
1nventory
Transare
nt
T0) 6+1& *+7+,),(' +6 2&3)(%,4 %5
6
The roduction concet is one o! the o#dest concets in business& The roduction concet
ho#ds that consumers wi## re!er roducts that are wide#y avai#ab#e and in exensive&
5anagers o! roduction oriented businesses concentrate on achieving high roduction
e!!iciency #ow costs, and mass distribution* assuming that consumers are rimari#y
interested in roduct avai#abi#ity and #ow rices&
1.1 THE PRODUCT CONCEPT
The roduct concet ho#ds that consumers wi## !avour those roducts that o!!er the most
:ua#ity, er!ormance or innovative !eatures& ( roduct is the sum o! the hysica# and
sycho#ogica# satis!action buyers receive when they make a urchase& 1t may be said to
satis!y needs& 1! it ossesses the Tangib#e and 1ntangib#e services&
T2,4%8.)' I,(2,4%8.)'
(vai#abi#ity and de#ivery Brand
;esign and ackage .erceived va#ues
.er!ormance
.rice
Taste
+eight
( roduct can be viewed as a %bundle of attributes. 6ome o! these attributes are rea# such
as co#or, taste, weight& 9ther roduct attributes are im#ied or erceived by customers, they
use branding, distribution, ackaging to roduce the desired brand image in their minds& (
brand is a name, term, sign, symbo# design in the signature or co#or intended to identi!y
these sa#es roducts&
7
1.2 CLASSIFICATION OF PRODUCTS
"onsumer roducts can be c#assi!ied into three ma?or categories deending on consumer$s
shoing habits, name#y/0
"onvenience goods
6hoing goods
6ecia#ty goods
1.3 CONVENIENCE GOODS
These are re#ative#y inexensive, !re:uent#y urchased items !or which buyers exert on#y
minimum urchasing e!!ort& They are easi#y urchased !rom accessib#e stores& "onsumers
are !ami#iar with these items& The roduct becomes de!ined in their minds& The unit rice
!or these tye o! items is too sma## to ?usti!y them going !ar away in order to buy a secia#
brand& "onvenience goods can !urther be c#assi!ied into sta#e goods, goods urchased on a
regu#ar basis such as bread and mi#k, imu#se goods !or exam#e sweets, ice cream #aced
near suermarket check in counter those urchased when a need is urgent !or exam#e an
Dmbre##a on a rainy day&
1.4 SHOPPING GOODS
6hoing goods are roducts that consumers search #an out and comare be!ore a
urchase decision* the customer comares avai#ab#e a#ternative o! goods on basic& "riteria
such as :ua#ity rice suitabi#ity and sty#e& Buyers send more time comaring stores and
brands with resect to rice, roduct !eatures, :ua#ities* services and erhas warranties&
=xam#es inc#ude items such as re!rigerators, te#evisions, and radios& =va#uation,
comarison, consumer$s window sho to di!!erent retai# out#ets in order to obtain the best
dea#& 9rdinari#y, a secia# tri is made to the 6hoing "entre !or buying such
merchandise&
1. SPECIALIT! PRODUCTS
6ecia#ty roducts ossess one or more uni:ue characteristics and genera##y buyers are
mi##ing to exand considerab#e e!!ort to obtain them searching in the items are done
because these roducts have uni:ue !eatures or brand identi!ication !or which customers
make a secia# urchasing e!!ect& This induces them to visit a retai# store and urchase the
roducts within the need !or window shoing&
(ccording to Eibera and +aruingi (19--) customer do not send a #ot o! time on window
shoing because they a#ready know what they want& =xam#es o! secia#ty goods are high
:ua#ity cameras, some brands o! men suits and anti:ue !urniture& 9rders can be made on
these goods and consumers can wait because they have a secia# need !or them, because
they do not accet a substitute !or a secia#ty good& They sometimes undertake
extraordinary e!!ort to urchase such as item&
9ther common ways o! c#assi!ying consumer goods inc#ude/0
8
1." DURABILIT!
;urab#e goods such as motor vehic#es, which are consumed reeated#y& 9n the other hand
non durab#e goods such as bread, soa, their consumtion on#y 4 !ew days or uses&
1.# PERISHABILIT! OF PRODUCTS
Here we have goods such as agricu#tura# roducts which do decay in :ua#ity a!ter a short
stay& Fon erishabi#ity inc#udes c#othes, !urniture& The term erishabi#ity is re#ative since
a## goods eventua##y wear out&
1.$ EXTENT OF MASS PRODUCTION
.roducts that are the same or uni!orm#y roduced !or a## in the market are re!erred to as
standard roducts, on the other hand, a roduct that is uni:ue and esecia##y roduced to
suit the re:uirements o! a seci!ic consumers is re!erred to as customi3ed roducts o!
medica# services, automobi#e reairs&
2.0 TOTAL PRODUCT CONCEPT
The tota# roduct concet entai#s surrounding the core bene!its o! a roduct with additiona#
#ayers o! va#ues to di!!erentiate it and enhance its market cometitiveness& ( tyica# tota#
roduct with various #eve#s o! va#ue is deicted in !igure )&1&
Augmented Product
Expected Product
Core
Product
9
2.1 CORE PRODUCT
1t is a#so re!erred to as generic roduct& This consists o! basic ingredient and the actua#
bene!its o! the roduct& The core roduct addresses the :uestion& %+hat is the customer
rea##y buying' ;oes it bene!it the customer basic needs, which actua##y trigger the urchase
rocess& The core roduct addresses the basic rob#em so#ving or !unctiona# caacity that
the consumer seeks when urchasing the item&
2.2 EXPECTED PRODUCT
The exected roduct is a#so ca##ed the basic or tangib#e roduct that is bui#t around the
core roduct& 1ts main characteristics inc#ude the :ua#ity #eve#, design !eatures, sty#e, brand
name, and ackaging& (## these characteristics must be combined care!u##y in order to
de#iver the core bene!its o! the roduct& (t this #eve#, it sti## becomes di!!icu#t to
di!!erentiate the roduct because cometitors can sti## match these roducts&
2.3 AUGMENTED PRODUCT
(ugmented roduct bui#d around the core and the exected roducts, it is achieved by
o!!ering additiona# goods and services that roduce extra va#ue to the customer$s urchase&
5arketers sha## study the market and evo#ved su#ementary va#ue e#ements not current#y
o!!ered by the cometition& (dded va#ues may inc#ude enhanced image, credit, customer
service, com#ementary roducts, warranties, and a!ter sa#es0suort& This then
di!!erentiates the roduct and he#s the !irm attain cometitive advantage&
3.0 PRODUCT LIFE C!CLE CONCEPT
(nother imortant e#ement o! the roduct theory is the .roduct Ci!e "yc#e (.C") concet&
(.C") attemts to describe the #i!e stages o! a roduct uon its commercia#i3ation or #aunch
into the market& 1t suggests that roducts are introduced into the market, grow to maturity,
enter o#d age, and dec#ine (die)& The ro!itabi#ity and sa#es osition o! a roduct is exected
to cover the stages& ;esite criticism the (.C") has roved to be a use!u# contro# device !or
monitoring and managing roducts dividing their #i!e time in the market& 1n articu#ar it
guides marketing managers in the right use o! marketing mix strategies, since one stage o!
the (.C") re:uires a di!!erent emhasis on the 4.s& 7igure <&1 deicts a .C" curve&
l0
PRODUCT LIFE CYCLE
3.1 INTRODUCTION STAGE
This stage is the commercia#i3ation stage o! the new roduct or innovation& 1t is a eriod o!
s#ow growth, with sa#es rimari#y to the more innovative customers& The ro!its are #ow or
negative due to heavy exenses incurred !or roduct introduction& The riority is to raise
awareness and areciation o! the roduct, so that the marketing mix emhasi3es on in
!arming otentia# customers, inc#uding roduct tria#s and securing distribution in retai#
1ntroduction Browth 5aturity ;ec#ine 1ntroduction Browth 5aturity ;ec#ine
ll
out#ets& The roduct range is re#ative#y narrow* distribution is robab#y #imited to a se#ected
number o! out#ets&
3.2 GRO%TH STAGE
This is the eriod o! raid market accetance and substantia# ro!it imrovement& 6a#es
vo#ume increase steadi#y roduct is acceted across much under range o! customers and
begins to make a signi!icant contribution to ro!itabi#ity& 6a#e increase can be maintained
imrovement on roduct !actors, extension o! the re!erence advertising distribution
network, targeting o! more segment, or increased cometitiveness o! rice& .romotion
strategies shi!t !or roduct awareness advertising the roduct&
3.3 MATURIT! STAGE
+hen a roduct reaches maturity, the rate o! sa#es growth begins to stabi#i3e and s#ow
down because it has achieved accetance by most otentia# customers& The sa#es s#owdown
creates overcaacity in the industry, which #eads to intensi!ied cometition& The market
then is mature& The marketing camaign (romotion) and roduct as we## estab#ished
ricing o#icies are #ike#y to be comarab#e to those o! cometitors& ;istribution is most
extensive and romotion tends towards attracting consumers !rom cometing brands& There
are, there!ore, !re:uent rice markdowns, increased advertising exenditure, and high trade
and consumer romotion& .ro!its eak in this eriod and begin to dec#ine because o!
increased market exenditure !or sustaining roduct osition against the cometition&
3.4 DECLINE STAGE
This dec#ine stage is when sa#es begin to dro away noticeab#y !or a number o! reasons
inc#uding techno#ogica# advances, shi!ts in consumer re!erences and increased domestic
and !oreign cometition& 5anagers are #e!t with a number o! otion&
The roduct wou#d be retained and the cash !#ow maximi3ed by rice cutting
and reduces marketing suort&
1! the roduct is seen as one with the otentia# #ong term !uture, then the
aroriate strategy may be one o! the re?uvenation (re#aunching, reositioning)
by redesigning the roduct a#ternating !eatures or changing :ua#ity&
1! the above two o! these strategies is deemed aroriate, then the roduct
wou#d be withdrawn entire#y !rom the ort!o#io, i&e& divested&
4.0 IDENTIF!ING A PRODUCT LIFE C!CLE STAGE
+here a articu#ar roduct is in its #i!e cyc#e deends on a number o! !actors/0
Aate o! change in industry sa#es growth
l2
The industry ro!its
1n!ormation about cometitors
To identi!y the #i!e cyc#e o! a roduct !o##owing genera# guide#ines shou#d be !o##owed/0
There ought to be a regu#ar review o! the current market er!ormance o!
existing roducts&
The !uture o! each roduct shou#d be estimated in terms o! both sa#es revenues
and costs in order to obtain !uture ro!itabi#ity
7uture #i!e and ro!itabi#ity shou#d be discussed with exerts are avai#ab#e to
give advice, research and deve#oment sta!! about the exected roduct #i!e,
management accountant, cost ro?ection, marketing so!t, consumer re!erences
ro?ection and cometitors trend&
Hava#dar ()GG)) rooses the !o##owing !our stes to he# #ocate the actua# #ocation o! a
roduct within the #i!e cyc#e stages/0
;eve#o a trend ana#ysis !or the ast three to !ive years on in!ormation to be
co##ected !or a roduct on :uantity and va#ue o! sa#e, ro!its as a ercentage o!
sa#es, market share, number o! cometitors and rices&
(na#y3e cometitors$ market share, roduct er!ormance new roduct
introduction or exansion #ans&
=stimate and ro?ect roduct sa#es and ro!its over the next three to !ive years&
7rom the above ana#ysis, !ix the roduct the roduct$s osition on its #i!e cyc#e
curve&
4.1 CRITICISMS OF THE PLC CONCEPT
.C" cannot be easi#y stated or de!ined as the task is not accurate and is very
invo#ving&
( sing#e #i!e cyc#e does not exist nor does a sing#e #i!e cyc#e strategy& 6ome
roducts have no #i!e maturity and so straight !rom growth to dec#ine& 9thers have/
6trategic decisions can change a roduct o! #i!e cyc#e&
"ometition varies in di!!erent industries and in their Fature o! .roducts&
=#ements such as market innovation, economic cyc#es, and su#y constraints a!!ect
the structure o! the #i!e cyc#e&
The .C" concet is unc#ear about the kind o! roduct aggregation it dea#s with is it
a roduct c#ass (te#evision set) roduct !rom (b#ack and white Tv versus co#or TH)
Brand (6ony, CB, 6anyo, or 6amsung) de!inite#y each roduct #eve# wou#d certain#y
ossess a di!!erent #i!e cyc#e&
;esite the entire .C" curve sti## rovides an imortant !rame worth that he#s
management make aroriate marketing mixed decisions&
l3
4.2 MANAGING EXISTING PRODUCTS
The marketing game #ans strategies a comany can em#oy to manage its existing roduct
range e!!ective#y a#though the task is :uite overwhe#ming esecia##y when a comany has a
number o! roducts in its ort!o#io or basket in to have this mode# deicts here in !igure
4&1&
The B"B growth share matrix was deve#oed by Boston consu#ting grou a #eading g#oba#
management consu#tancy in reviewing existing or estab#ished roduct or businesses& 1t
eva#uates their market share and rosects that eva#uate !rom their market growth rate,
which enab#es the !ormu#ation o! aroriate decision&
4.3 BCG &'()*+, - B*./0e.. Ma0age1e0, Ma,'/2
4.3.1 STARS
These are roducts with high market share in high growth rate market& 6tars are market
#enders in raid#y growing markets& (#though these roducts are high#y ro!itab#e, they
re:uire a #arge cash investment in order to maintain growth in the !ace o! cometition&
5arket need to retain the roducts in the ort!o#io but suort them through extensive
romotion, aroriate market channe#s re#ation* roduct enhancement and cometitive
ricing&
STARS
FULLY SUPPORT
QUESTlON MARK
SELECT A FEW
DOGS
HlG
H
LOW
REMAlND
ER
DlRECT
(NET FUND LlQUlDATE /
DlRECT
(NET FUND
l4
4.3.2 CASH CO%S
These are roducts with a #arge market share in a s#ow growth market& They are tyica##y
!ormer stars in a s#uggish market but sti## generate cash because o! their high market share
in revious years& "ash cows en?oy economics o! sca#e and high ro!it margin, since they
are we## estab#ished roducts in the maturity stage o! the roduct o! #i!e cyc#e& 5arketers
shou#d mi#k then and use the excess !unds to suort stars and romising rob#em chi#d
roducing& They shou#d avoid mi#king them excessive#y, which might cause them to #oose
market resence and share&
4.3.3 DOGS
These have #ow market share in #ow growth market& They tend to generate either #osses or
re#ative#y #ow ro!its& They take u more management time and organi3ationa# !unds than
warranted& ;ogs shou#d be candidate !or runing, they are #oss making roducts& 7unds that
arise !rom their sa#e o!! or saved !rom their discontinued oeration can be used to suort
stars and romising :uestion mark&
4.3.4 3UESITON MARKS - PROBLEM CHILD
.roducts with #ow market share area raid#y growing market is ca##ed :uestion marks or
rob#em chi#dren& 5anagement has to decide whether to suort them or not& 1t must
choose between !urther secu#ation investment and withdrawa#& 5anagement shou#d divert
those @uestion marks whose caacity to cature the growing market are #ow& They can
then generate !unds to suort stars and the rest o! the more romising :uestion marks&
.0 THE SELLING CONCEPT.
This concet assumes that consumers tyica##y show buying inertia or resistance and must
be coaxed into buying& The se##ing concet is racticed most aggressive#y with unsought
goods, such as insurance encyc#oedias and !unera# #ots& These industries have er!ected
various sa#e techni:ues to #ocate rosects and hard0se## them on their roducts bene!its&
6e##ing concet is ractices in the non0ro!it are by !und0raisers, co##ege admission o!!ice
and arties& Cike a o#itica# arty vigorous#y se## its candidate as candidate move through
voting recinct !rom ear#y morning to #ate evening, shaking hands, kissing babies, meeting
donors and making seeches count#ess money is sent on radio, and te#evision advertising,
osters, and mai#ings& The aim is to make sa#e not worry about ost urchase satis!action&
5ost !irms ractice the se##ing concet when they have over caacity& Their aim is to se##
what they make rather than what the market wants& 1n modern industria# economies,
roductive caacity has bui#t u to oint where most market are buyer markets (the buyers
are dominant) and se##ers have to scramb#e !or customers& .rosects are bombarded with
TH commercia#, Fewsaers, direct mai# and sa#es gir#s& The ub#ic o!ten identi!ies
marketing with herd se##ing which carries high risk #ike i! the customers don$t #ike the
roduct they wi## bad0mouth because they were coaxed into buying a roduct, but soon
!orget the disaointment and buy it again& Fote bad news trave#s !ast&
.1 Mea0/0g a0) Va4*e (5 P'/+e
.rice can be de!ined as a measure o! the va#ue o! exchange, !or bene!its received by
customers and va#ue o! comensation given to se##ers !or their roduct ricing is the on#y
l5
market mix e#ement which generates revenues not costs& 1t is an imortant ro#e as a
cometitive too#& 1t he#s di!!erentiate a roduct and an organi3ation&
.rice must a#ways be consistent with other e#ements o! marketing mix as in the overa##
roduct o!!er& .ricing aids organi3ation to roduce the re:uired #eve# o! sa#es, and to
achieve its ob?ectives& (nother ob?ective is to achieve target ro!itabi#ity, increase market
share, create re!erred market image and meet socia# goa#s&
.2 ECONOMIC THEOR! OF PRICING
=conomists suggest that in a !ree market economy the rice o! any good is set by the
market !orces o! demand and su#y& (n e:ui#ibrium exists there is neither sur#us nor
shortage o! !oods in :uestion& The !o##owing mode#s are used to describe markets where a
su#ier or grou su#iers have market rices&
.2.1 PURE MONOPOL!
This is a sing#e su#ier in a market and is ab#e to revent entry o! other su#ies&
5onoo#ies take advantage o! customers with exorbitant rices& =xam#e is the Eenya
.ower&
.2.2 OLIGOPOL!
9#igoo#ists are members o! a sma## grous among themse#ves they contro# the su#y in
the market o#igoo#y is characteri3ed by rice %stickiness e&g& cement and oi# industry&
.2.3 MONOPOLISTIC COMPETITION
6u#iers try to gain some o! the monoo#y$s market ower by su#ying a di!!erentiated
roduct& 1ts success deends on customers viewing the roduct di!!erent#y& =xam#es are
te#ecommunication industry which has 6a!aricom, (irte# and orange, and the detergent
industry which has 9mo and Toss&
.3 KE! ISSUES THAT DETERMINE MARKETING PRICING
The key !actors that direct#y a!!ect roduct rice setting decisions in !irms are/0
.roduction costs
"ometition
;emand
1ntermediaries margins
6u#ier (d?ustments
1n!#ation
.roduct ositioning
1ncome #eve#s
.3.1 PRODUCTION COSTS
Benera##y, a## roduction and oerationa# costs shou#d be estimated and a##ocated to each
item unit roduced, a ro!it margin shou#d be added to set the rice o! roduct some
roducts costs are estimated using cost accounting techni:ues&
l6
.3.2 COMPETITION
1n some industries rice cometition resu#ts in a going rate !or exam#e market rice& 6ome
!orm o! average #eve# o! rice becomes the norm esecia##y where #eve# o! branding
di!!erentiation among cometitors in more or #ess the same&
.3.3 DEMAND
Ceavitt (19I4) :uestion the va#idity o! the rice vo#ume inverse re#ationshis (roduct
dec#ines as its rice increases, it increases as it rice dec#ines) he#d by economists&
.3.4 INTERMEDIARIES MARGINS
1! organi3ations distribute roducts or services to the market through indeendent
intermediaries conditions and demands o! these intermediaries have an e!!ect on the ricing
decision& The aim concern is their ro!its and not the !irm$s customers* so the !irm gives
them better margin in order to sustain suort&
.3. SUPPLIER AD6USTMENT
+hen the !irms$ roducts are rising and business is high, they may seek arise in the rice o!
their inuts, but i! the !irm business is #ow, the su#ier ad?usts downwards, because they
want to maintain their business re#ationshi with it&
.3." PRODUCT POSITIONING
1n the absence o! other in!ormation, customers tend to ?udge :ua#ity by rice (#acebo
e!!ect)& This he#s attain desired market ositioning o! the roduct&
.3.# INCOME LEVELS
+hen income #eve#s !a## on unem#oyment #eve# rise, rice becomes a much more
imortant market variab#e& 5arketers shou#d ad?ust roduct rices with changing income
#eve#s in the market&
.4 PRICE SETTING STRATEGIES 7H/g8 Re4a,/9e P'/+e:
7or the strategy to be success!u#, the !o##owing conditions shou#d revai#&
There must be enough customers who are not rice sensitive&
"ustomers shou#d erceive high rice as e:uiva#ent to high :ua#ity
There shou#d be insu!!icient industry roduction caacity so cometitors can
introduce simi#ar roducts at #east in short run&
. MARKET PENETRATION STRATEG! 7L(; Re4a,/9e
P'/+e:
This strategy is on#y success!u# i!/0
The market demand is rice0sensitive re#ative#y #ow rices attract more sa#es
=conomies o! sca#e can be achieves (unit cost o! roduction and distribution !a##
with increased outut) and
Cow rices discourage new cometitive&
l7
." PS!CHOLOGICAL PRICING
.sycho#ogists assert that customers erceive odd numbers ositive#y as oosed to even
numbers Bata shoe use the odd number ricing, E=6 499, because customers do not
resond !avorab#y i! rices were even number e&g& E=6 IGG& 6ome customers even !orget
to co##ect their one shi##ing change&
.# DIFFERNETIAL PRICING
This is re!erred to as rice discrimination& 1t invo#ves setting di!!erent rices !or searate
#ocation or customer c#asses, !or the exact same roduct& This may be addressed by/0
6#itting buyers in c#ear#y de!ines segments have versus overseas buyers, umarket
versus #ow end customers&
.ositioning #ocation or se##ing sites, suburban versus downtown #ocation&
.$ GOING RATE PRICING
This is a#so re!erred to as market ricing and invo#ves a#igning a !irms roduct rices to
those o! simi#ar roducts in the market&
.< COST = PLUS PRIVAC!
This is a ricing aroach which uses roduct costs as the starting oint& (!ter unit costs
have been determined a certain #eve# o! ro!it margin is added to obtain the roduct rice&
.10 ON> COIN PURCHASING PRICING
Aather than change rices to re!#ect change in raw materia# #ost as in times o! in!#ation in
Eenya bakers were a##owed by the government to change the standard weight o! bread
!rom IGGgm to 4GGgms in order to maintain the same rice #eve#&
.11 3UANTUM PRICING
+hen the rice o! an item is increased !orm Eenya shi##ings& 6I to 9I sa#es may not be
a!!ected because consumers can accommodate the change, but an increase !rom Eenya
shi##ings& 9I to Eenya shi##ings& 1GI a ma?or !a## on sa#es may occur& Eenya shi##ings& 1GG
act as the :uantum oint (to#erance #imit) which can be aroached but not assed&
.12 PREDATOR! PRICING
.redatory ricing are used to hurt cometitors and drive them out o! business& They are set
at very #ow #eve# unti# cometitors are driven out o! business&
l8
.13 PROMOTIONAL PRICING
They are re!erred to as %special or %sale rices so#d at #ower than the current rices& 1n
order to attract customers and have #ow ro!it margin the #ow riced items are ca##ed #oss
readers or rice #eaders and strategy is ca##ed #eader ricing&
Aetai#er use this strategy to bui#d tra!!ic thus to their out#et in anticiation o! customers
buying other norma# items romotiona# techni:ue is used at retai# #eve# is sycho#ogica#
discounting& 1t is re!erred to as %was0is' ricing& The se##er uts arti!icia##y high rice on a
roduct and o!!ers at ?ust savings exam#e Eenya shi##ings& ),IGG is now Eenya shi##ings&
1,IGG&&
".0 MARKETING PROMOTION MIX
.romotion is communication that bui#ds and maintains !avorab#e re#ationshis by
in!orming and ersuading one or more audiences to view and organi3ation more ositive#y
and to accet its roducts& The overa## ro#e o! romotion is to stimu#ate roduct demand&
THE PROMOTIONAL TOOLS?>
(dvertising
6a#es romotion
.ub#ic Ae#ations and .ub#icity
.ersona# se##ing
;irect marketing
7igure 6&1 shows the romotiona# too#s&
THE FOUR POSSlBLE ELEMENTS OF A PROMOTlONAL MlX
Adverti
sing
Advertising
Advertising
Public
Relation
Public
Relation
Sales
Promotion
Sales
Promotion
Personal
selling
Personal
selling
l9
".1 ADVERTISING
(dvertising is a aid non ersona# communication about an organi3ation and its roducts
transmitted to a target audience through mass media, inc#uding te#evision, radio, internet,
newsaers, maga3ines, direct mai#, outdoor dis#ay signs on mass 2 transit vehic#es&
1ndividua#s and organi3ations use advertising to romote goods, services, ideas, issues and
eo#e& (dvertising can reach an extreme#y #arge target audience or !ocus on a sma##
recise#y de!ined segment&
THE FOLLOWING QUALITIES ARE NOTED.
P18.%* 7&)'),(2(%+, 2 con!ers a kind o! #egitimacy on roduct and suggests a
standardi3ed o!!ering&
P)&92'%9),)'' 2 ermits the se##er to reeat a message many times, it a#so a##ows a
buyer to receive and comare the message o! various cometitors&
A7.%6%)- )57&)''%9),)'' 2 it rovides oortunities !or dramati3ing the comany
and its roducts through the art!u# use o! rint sound and co#or&
I7)&'+,2.%(/0 (dvertising is a mono#ogue in !ront o!, not a dia#ogue with this
audience&
".2 SALES PROMOTION
6a#es romotion is an activity that acts as a direct inducement, o!!ering added va#ue or
incentive !or the roduct to rese##ers, sa#es eo#e or consumers& =xam#es inc#ude !ree
sam#es, !ames, rebates, sweestakes, contests, remiums and couons0 some websites
he# consumers manage access to couons& 5arketers send time more on sa#es than
advertising and it is an area which is !irst growing&
These are three distinctive bene!its o! sa#es romotion&
"ommunication 2 (ttention and in!ormation #eads consumer to the roduct
1ncentives0 they incororate some concession inducement o! contribution that
give va#ue to the consumer&
1nvitation 2 They inc#ude a distinct invitation to engage in the transaction now&
".3 PUBLIC RELATIONS AND PUBLICIT!
.ub#ic re#ations are a broad set o! communication e!!orts used to create and maintain
!avorab#e re#ationshi between an organi3ation and its0stakeho#ders& .ub#ic re#ationshi
issue various too#s inc#uding annua# reorts, brochures, event sonsorshi and sonsorshi
o! socia##y resonsib#e rograms aimed and rotecting the environment or he#ing
disadvantaged individua#s&
.ub#ic re#ationshi has three distinct :ua#ities&
20
High credibi#ity0 new stories and !ee#ing are more authentic and credib#e to reader
their advertising&
(bi#ity to can to catch buyers o!!0guard0 ub#ic re#ation can reach rosects who
re!er to avoid sa#es eo#e and advertisements&
;ramati3ation 2 ub#ic re#ations has the otentia# !or dramati3ing a comany or
roduct e&g haric as seen on TH !rom house to house&&
".4 PERSONAL SELLING
.ersona# se##ing is a aid ersonne# communication that seeks to in!orm customers and
ersuade them to urchase roducts in an exchange situation& 1t has three distinctive
:ua#ities&
P)&'+,2. *+,6&+,(2(%+, 2 each arty is resonsib#e !or each others reaction&
C1.(%92(%+, 2 (## kind o! re#ationshis sring u ranging !rom another o! !act
se##ing to a dee ersona# !riendshi& 6a#es wi## have ersona# customers interest
at heart&
R)'7+,')0 5akes the buyer !ee# under some ob#igation !or having #istened to
the sa#es ta#k&
#.0 PLACE
.#ace is the #ocation where the exchange takes #ace or this may be a retai# store, a
cata#ogue, a restaurant or website& 9ne decides whether is to more goods round a#though
hysica# distribution is one asect o! the rocess&
The decision revo#ve around making it ossib#e !or customers to !ind the goods and make
the urchase, and so use channe#s which give aroriate image o! the roduct& They are
two key issues to distribution !rom a marketing oint o! view&
.hysica# distribution
"hanne# management
#.1 PH!SICAL DISTRIBUTION
.hysica# distribution is concerned with hysica# moving a roduct !rom where it is
roduced to where it is so#d or consumed& There are channe#s o! distribution& ( channe# is
de!ines as a chain o! market intermediaries or midd#emen used by roducers and marketers
to make roducts avai#ab#e when consumers want them&
PHYSICAL DISTRIBUTION TASKS OR CHANNEL
F1,*(%+,' 2&):
Transortation
1nventory storage and contro#
Coca# know#edge
.romotion
2l
;is#ay
"ustomer service
#.2 DISTIRBUTION-CHANNEL MANAGEMENT
;istribution is a grou o! individua#s and organi3ation that direct the !#ow o! roducts !rom
roducers to customers within the su#y chain& The ma?or ro#e o! marketing channe#s is
concerned with oerations management, #ogistics management, and su#y management*
its main concern is to make roducts avai#ab#e at the right time at the right #ace in the right
:uantities&
6ome marketing channe#s are direct, meaning that a roduct goes direct#y !rom roducer to
customer& 9ther marketing channe#s have one or more marketing intermediaries that #ink
roducers to other intermediaries that #ink roducers to other intermediaries or the u#timate
consumers through contractua# arrangements, or through the urchase and resa#e o!
roducts&
+ho#esa#ers and retai#ers are exam#es o! intermediaries& +ho#esa#ers buy and rese##
roducts to other who#esa#ers, to retai#ers and to industria# customers& Aetai#ers urchase
roducts and resa#e them to the end customers&
6u#y chain start with the customer and re:uire the cororation o! channe# members to
satis!y customer re:uirements& (## members shou#d !ocus on cooeration to reduce costs
and imrove ro!its&
=ach su#y chain re:uires in!ormation !rom channe# members, !or exam#e su#iers need
order and !orecast in!ormation !rom the manu!acturer& They a#so need avai#abi#ity
in!ormation !rom their own su#iers& 5anaging re#ationshis with su#y chain artners is
crucia# to satis!y customers&
#.3 SIGNIFICANCE OF MAREKTING CHANNELS
They are a ower!u# in!#uence on the rest o! the marketing mix (roduct, romotion, and
ricing)&
They determine a roduct$s resence and buyer$s accessibi#ity to the roduct&
They entai# #ong term commitments among a variety o! !irms (e&g& su#iers,
#ogistics roviders, and oerations !irms)&
They create uti#ity and !aci#itate exchange e!!iciencies
22
#.4 UTILIT!
5eans the customer has access to the roducts to use or to store !or !uture use& "hanne#
member sometimes create !orm uti#ity by assemb#ing, rearing or otherwise re!ining the
roduct to suit individua# customer needs&
5arketing intermediaries can reduce costs o! exchanges by er!orming contain services or
!unction e!!icient#y& (s in 7igure ,&1 shows when !our buyers seek roducts !rom !our
roducers 16 transactions are ossib#e&
Feverthe#ess, the ress, customers, ub#ic o!!icia#s and even other marketers !ree#y critici3e
intermediaries esecia##y who#esa#ers o! being ine!!icient and arasitic buyers want short
distribution channe#s* assuming that the !ewer the channe#s the #ower the rice wi## be
&+ho#esa#es must be care!u# to er!orm on#y those marketing activities that are tru#y
desired&
23
FlG 7.l: EFFlClENCY lN EXCHANGE PROVlDED BY lNTERMEDlARY
THE PRODUCERS AND CONSUMERS RE:UIRED EFFORT SOURCE
LILIEN,KOTLER,AND MOORTHY ;#999<.
PRODUCER
S
BUYERS
p c
p
c
p
c
p
c
PRODUCERS BUYERS
P
lNTERMEDlARY
P
P
P
C
C
C
C
24
#. T!PES OF MARKETING CHANNELS
Because marketing channe#s aroriate !or one roduct may be #ess suitab#e !or others,
many di!!erent distribution aths have been deve#oed& The various marketing channe#s can
be c#assi!ied genera##y as channe#s !or consumer roducts and channe#s !or business
roducts&
C02,,).' 6+& C+,'1)& P&+-1*('
7igure )&) i##ustrates severa# channe#s used in the distribution o! consumer roduct&
"hanne# 0 (
"hanne#0 B
"hanne# 0 "
"hanne#0 ;
C02,,). A
;eicts the direct movement o! roducts !rom roducer to consumer& ;irect marketing can
be done via internet& 1t is done by other comanies in cooked !oods hamburger and steak&
C02,,). B
5oves goods !rom roducer to a retai#er and then to customer& Cike the c#othing industry&
C02,,). C
Aeresents a #ong standing distribution channe# esecia##y !or consumer roducts& +rigg#e
u 4 wi## !ind it di!!icu#t or imossib#e to dea# direct#y with each retai# that se##s it brand o!
sum& =ven manu!acturers o! Tobacco roducts& They se## to who#esa#ers, which they se## to
retai#ers with in turn do business with individua# consumers&
C02,,). D
This is in mass roduction goods where a !ood rocessor hires an agent to se## the
who#esa#ers se## it to suermarkets, which in turn do business with the other retai# out#ets&
Fig. 7.2
Typical Marketing Channel for Consumer Products
A B
C D
Produce
r
Produce
r
Produce
r
Produce
r
Retailers
Consumer
Wholesale
s
Retailers
Consumer
Consumer
Retailers
Consumer
Wholesale
s
25
#." INDUSTRIAL DISTRIBUTOR
1ndustria# distributor is an indeendent business that takes tit#e to roducts and carries
inventories& They usua##y se## standardi3ed items such as maintenance su#ies, roduction
too#s, and sma## oerating e:uiment& Their advantage is that they o!!er se##ing activities in
#oca# markets at a re#ative#y #ow cost to a manu!acturer and reduce a roducer$s !inancia#
burden by roviding customers with credit services& They are a#so aware o! customer needs
and kee c#ose re#ationshis& There are indeendent !irms which kee inventories and in
customer numerous exenses, something they #ack technica# know#edge necessary to se##
and service certain roducts&
Third#y they em#oy agents who se## on beha#! o! the roducers or manu!acturers& These
agents may not have negotiating ski##s on rices or sa#es terms
#.# SELECTING MARKET CHANNELS
1t varies !rom one organi3ation to the other in channe# se#ection, decisions are usua##y
signi!icant#y a!!ected by one or more o! the !o##owing !actors/0
"ustomer characteristics,
.roduct attributes
Tyes o! organi3ation
"ometition
5arketing environmenta# !orces and characteristics o! intermediaries&
26
See Figure 7.3
Selecting Marketing channels

C1'(+)& *02&2*()&%'(%*' 2 urchasing one roduct !or a caret !or a commercia#
bui#ding is di!!erent !rom urchase o! caret !or their home&
P&+-1*( 2((&%81()' 2 erishab#e roducts as comared to non0erishab#e roducts
re:uire #arger and short re:uire secia# hand#ing&
T/7) +6 +&42,%=2(%+, 2 sheer si3e a!!ect in terms o! negotiating because they have
more !aci#ities in distribution centers or way it is done&
C+7.)(%+, 2 "osts have to be ket so as to underriced its cometitor i!
necessary&
E,9%&+,),(2. 6+&*)' 2 such as economic condition, new techno#ogy !or roduct
modi!ication, government regu#ation as in trade agreements can com#icate su#y
chain&
C02&2*()&%'(%*' +6 %,()&)-%2&%)' 2 a comany may consider to remove a channe#
i! it is not oerating to its satis!action&
"haracteristics
intermediaries
"ustomer
"haracteristics
.roduct attributes
5arketing channe#
se#ection
Tye o!
organi3ation
"ometition
5arketing
environmenta#
!orces
27
$.0 REFERENCES
Boo3, (##en and Hami#ton& (19-))& Few .roduct ;eve#oment !or 19-G$s&
Borden, Fei# H& (1964)& The Concept of the Marketing Mix. 8ourna# o! (dvertising
Aesearch& 8une/ )0,&
;rucker, .eter& (19,<)& Management: Tasks, Responsibilities, and Practices.
;ruckereter& (19,<)& Management: Tasks Responsibilities, and .ractices&
;r& 8ustus 5& 5unyoki, ()G11)& 5arketing 5anagement Theory and .ractice&
=nnew, "hristine T& (199<)& The Marketing Print.
Hava#dar, Erishna E& ()GG))& Industrial Marketing, Few ;e#hi/ Tata 5cBraw Hi##
.ub#ishing "omany&
28
Hunt, 6he#by ;& (19-<)& Marketing Theor: The .hi#osohy o! 5arketing 6cience&
8im B#ythe,()GG9)& Principles and Practice of Marketing, )
nd
=dition&
Eot#er, .hi##i, and Eevin Cane Ee##er& ()GG6) Marketing Management! 1)
th
=dition&
5ason, +i##iam A& (19I-)& ( Theory o! .ackaging in the 5arketing 5ix& Business
Hori3ons )9 (1)/ 1-0)4&
9ride, 7erre##, ()G11)& Marketing "oundations, 4
th
=dition&